The sale of Bebo.com to AOL for $850 million last week sparked a fresh wave of opining about music piracy, with Billy Bragg and Michael Arrington both stepping into the ring. The problem is, they are both wrong.

In the blue corner we have musician Billy Bragg, who sees people like Bebo founder Michael Birch as another type of pirate, or profiteer, earning millions by leveraging other people’s intellectual property, and sharing none of it. He writes in The New York Times:

“The musicians who posted their work on Bebo.com are no different from investors in a start-up enterprise. Their investment is the content provided for free while the site has no liquid assets. Now that the business has reaped huge benefits, surely they deserve a dividend.”

“What’s at stake here is more than just the morality of the market. The huge social networking sites that seek to use music as free content are as much to blame for the malaise currently affecting the industry as the music lover who downloads songs for free. Both the corporations and the kids, it seems, want the use of our music without having to pay for it.”

Artists add value to Bebo, but Bragg is over-reaching claiming they deserve a share in Bebo’s sale price. Bebo also adds value to artists who voluntarily post their songs on the site. Does Bragg also think artists who post on Bebo.com should share their concert ticket profits and royalties with the social network?

In the red corner we have Michael Arrington from TechCrunch, making the opposite but no less extreme case that “recorded music is nothing but marketing material to drive awareness of an artist.” He also says “if an artist can’t make a living playing concerts live, then he/she may want to think of it more as a hobby than a way to make a living.”

Arrington reasons that because music can be reproduced at a zero marginal cost, it should be free. But marginal cost does not equal total cost. It still costs something to produce music. It still takes money, time and effort to produce good music, not to mention software, movies and other goods with zero marginal cost. People producing such things need to make money in the end. Zero marginal cost does not mean it should be free. It just means we need a new distribution system.

Bragg’s line of reasoning is skewed, but he makes one good point; creative works like songs and films are worth something, and we have to figure out a way to reward creative people fairly in the age of the Internet.

Arrington’s argument is also flawed, but he’s right to say that Bragg is off the mark, and he’s right to say we should neither “line up file traders and shoot them”, or “give a government subsidy to anyone who calls themselves a musician so that they can pursue their art.”

Fortunately for the rest of us, these are not the only two options. Bragg and Arrington represent the two polar opposites in this ongoing debate, and they’re both wrong.

All the people at the extreme ends of both sides of this debate are wrong. But the truce is coming. Soon enough, there will very likely be a $5-$10 a month voluntary license fee for downloading all the music you want, and most people will be happy to pay it. As long as the money makes its way back to artists, it will help the music business grow.

I can’t wait to see an Internet where incredible music resources like OiNK can exist and artists can prosper at the same time, and that day is coming, hopefully sooner rather than later. But when that happens, another community will suddenly find itself as redundant as the music industry’s lawyers; the pirates.

When peace breaks out in the music business, a lot of people are going to have to find something else to talk about (which is why I cunningly future-proofed The Pirate’s Dilemma by talking about piracy in all businessesâ€¦). Music pirates will no longer be the face of the revolution, they will be part of the old regime. Over 500 years ago, Niccolo Machiavelli wrote: “Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those, who would prosper under the new.”

Pirates create periods of chaos, then society works out how to make this chaos work for everyone, at which point it is enshrined in law and becomes the new order. Piracy itself is not a long-term solution. The arguments for music piracy as a force for change will become old news when file-sharing is finally legitimized, but the good news is there is still plenty for pirates to rebel against.

The pirate’s job is to push the envelope, while the corporation must play catch up as fast as it can. Both of these communities need each other. But when the corporations do catch up, the pirates need to move on. File-sharing is not so much a movement that needs to survive for its own sake as it is a means to an end. This isn’t a war without end. It’s a negotiation.